What Is a Trust Protector & Do I Need One in California?

Understanding what a trust is or the process of estate planning can be difficult and confusing. The legal world of estate planning is complex, and the rules and strategies that make up the discipline never stay the same. This is why dedicated legal and financial professionals exist. They keep up to date with these changes so they can meet their client’s needs. Being able to hire someone to make sure that your assets are managed and distributed to your exact wishes can be extremely comforting. One such area of estate planning that has gained attention recently is the “Trust Protector.”

What Is a Trust Protector?

There are three main roles that traditionally make up a trust. These are:

1. Settlor: Someone who creates and funds the trust
2. Trustee: Any person or entity who manages the trust
3. Beneficiaries: Anyone directly benefiting from the trust

Now, any individual who seeks to engage in estate planning has a fourth role to consider: the trust protector. A trust protector is an independent third party who oversees the trust and ensures that it remains compliant with the original intent of the settlor. There are varying levels of power that a trust protector can have. This is up to the discretion of the settlor when they create and put the trust in place.

Some areas of authority that a trust protector could have include:

1. The ability to remove or replace a trustee: It’s not guaranteed that every trustee is going to perform their duties adequately. There are also scenarios where a conflict of interest could arise that did not exist originally. These are two areas where a trust protector could step in and officially remove a trustee.
2. The power to amend the trust: Sometimes, laws change. Other times, an unexpected circumstance could change the nature of a settler’s wishes. A trust protector has the authority to make any necessary modifications to the trust so that it remains effective and legal in California.
3. The authority to veto decisions: Because a trust protector takes time to become familiar with the desires of the settlor, they are effective at spotting a situation where a trustee may act inappropriately. This gives them the power to veto any decisions that they feel are not aligned with the settlor’s wishes.

Do I Actually Need a Trust Protector in California?

There is no mandate in California that requires anyone to have a trust protector for their estate plan. The decision to have one is deeply personal and will be up to each settlor.

Some reasons why people make the decision to have a trust protector include:

1. The trust is extremely complex: Sometimes, there are so many assets to manage that it can be wise to enlist the help of a trust protector. This is also true if there are multiple beneficiaries who live in different areas or if the settlor has very specific and atypical conditions.
2. A lack of trust in the trustee: Choosing a trustee can be a difficult decision, especially considering how relationships can evolve over time. If there are any reservations as to how trustworthy a trustee is, a trust protector can be that extra level of unbiased support to make sure that the trust remains compliant.
3. A strong likelihood of changing family dynamics: Different life events can drastically impact how someone wants a trust to be carried out, such as a divorce or the birth of a new child. A trust protector can help make any amendments that are needed as a family evolves.
4. Costs: While a trust protector is not free, many find that the investment can save them a ton of future unnecessary costs by preventing anyone from interfering with the settlor’s original wishes.

FAQs

Q: Does California Allow Trust Protectors?

A: Yes, California permits the use of a trust protector in any resident’s trust agreement. Because this is a modern addition to the traditional trust management process, California’s trust and estate laws do not codify any legal rights or duties of a trust protector. That doesn’t mean that they don’t have a place in the process. Their role must be outlined in great detail within any terms and conditions of a trust. That way, if there are any disagreements in the future that must be resolved in the courtroom, there will be official documentation to guide all stakeholders to a solution.

Q: What Is the Difference Between a Trustee and a Trust Protector?

A: A trustee is an individual who is responsible for managing a trust, while the trust protector is the unbiased third party who oversees the trust to help maintain compliance. The ideal way to remember their differences is to think about a trust like a ship sailing in the sea. The trustee is like the captain of the ship who is responsible for its daily operations, navigating the sea to make sure that it safely reaches its destination. The trust protector is like the lighthouse keeper on the shore, keeping an eye on the ship and making sure that it does not veer off course or crash into the land.

Q: Can a Trust Protector Remove a Trustee?

A: The only way that a trust protector can remove a trustee is if the original terms of the agreement explicitly state so. It can be a wise decision for a settlor to grant their trust protector this authority if they have any concerns about any of their trustees acting in good faith. Unfortunately, there will not be any legal flexibility if this was not an original condition of the trust.

Q: Should a Trust Protector Be a Fiduciary?

A: Most people who want a trust protector to be a member of their trust agreement want them to act as a fiduciary. This means someone who has a legal obligation to serve the settlor by acting in their interest at all times. This makes it clear that the trust protector must make all decisions based on the welfare of their client and the beneficiaries that the trust serves over their own personal interests. If this is not outlined in the trust, then the trust protector could technically not be held accountable if they made a decision that conflicted with their client’s wishes.

Contact Robert G. Petrovich, Attorney at Law, Today

It’s natural to feel overwhelmed when beginning to learn about trusts and estate planning. Any areas of the law that you may need clarity on, including the applications of a trust protector, can be addressed by Robert G. Petrovich, Attorney at Law. Connect with us today.